On January 9, 2018, the Board approved a three-pronged strategy for the County’s cannabis program. Although complementary and part of an integrated program approach, each strategy will operate on its own timeline and staff have developed a schedule for Board consideration of each item. In summary, the initial schedule for the Board’s approach to developing a comprehensive cannabis program includes the steps listed below. It is also included in Attachment A:
- Placing a general tax measure on the June 2018 ballot (Schedule: Board actions, adoption of tax ordinance February 6, 2018; Board direction on the composition of the Citizen’s Oversight Committee and scope of authority, March 6, 2018; Board action on resolution on Citizen’s Oversight Committee, TBD);
- Development Agreement implementation. (Schedule: proposed approach to “early implementation” development agreements for capital intensive cannabis projects to be presented on February 6, 2018, formal policy for Board consideration to be presented on March 6, 2018);
- Completing the development of the comprehensive land use regulations, including consideration of additional licensure categories (Schedule: Draft outline of land use ordinance to the Board on March 6, 2018, further public outreach through the Citizen Advisory Committees in late March; Planning Commission and Board workshops in April, draft environmental document and revised ordinance release September 2018, final environmental document and proposed ordinance release in early December; Citizen Advisory Committee meetings, Planning Commission hearing and recommendation and Board of Supervisors hearing and final action January – March 2019)
The action recommended by this staff report pertains to the cannabis program general tax measure for the June 2018 ballot. However, this staff report begins with an update on development agreements and proposed next steps, and an update on the comprehensive land use regulations and the RFP process for a limited number of nursery and processing facility licenses.
Early Implementation Development Agreements
The following discussion outlines a proposed approach to “early implementation” development agreements for capital intensive cannabis projects. Staff’s intention is to receive Board direction on this approach and then convert it into a formal policy for Board consideration on March 6, 2018.
In the interim, starting on February 6, staff propose that the Board authorize the submission of letters of intent (described below) by interested applicants so that initial implementation work can begin while a policy is finalized. Additional work, including ordinance amendments, may also be necessary prior to final action on any projects proposed pursuant to a final “early implementation” policy.
Eligible Projects
Projects eligible to apply for a development agreement would be limited to those proposing indoor (exclusively artificial light) or mixed-light (combination of natural and artificial light) cannabis cultivation. The size of the proposed operation shall conform to limits in state law applicable to small and medium-sized indoor and mixed light facilities (note that “large” facilities will not be permitted by the state until 2023). Under state law, the minimum size of such facilities is 2,501 square feet of canopy; the maximum size is 22,000 square feet of canopy.
Other cannabis-related uses and activities authorized under state law may be proposed in addition to cultivation as part of an integrated project, excepting only dispensaries.
All applicants must hold a current County cultivation license. All setbacks and other requirements of the interim Medical Marijuana Cultivation Ordinance also apply. Of course, eligibility to submit an application is not an assurance that a project will be recommended for approval or ultimately approved.
Application Process
The application process will have two parts: an initial letter of intent, followed by a full application for the development agreement and any other County permits and entitlements. Much of the process is based on requirements in the County’s Development Agreement Ordinance (Chapter 5, Title 8 of the Yolo County Code) (included as Attachment B). Full cost recovery for the process outlined herein will be achieved through the application of existing County fees, described in further detail below. Application fees defray all staff and consultant expenses and are separate from the “public benefit” elements of any development agreement (which may include additional monetary payments).
To start the application process, interested applicants would first submit a letter of intent to apply to the County. A letter of intent should include a summary of information required by Yolo County Code Section 8-5.201 for a proposed development agreement. Such information includes, among other things, a legal description of the project site, a description of proposed uses, information on the height and size of the buildings proposed for construction thereon, and a summary of any proposed public benefits. The letter should address each category of information required by Section 8-5.201 in summary fashion, providing enough information to enable the County to provide guidance to an applicant on any additional information that may be required for a full application that meets the requirements set forth below.
Deficient letters will be returned with information on what is required to submit a letter of intent that is “complete” with respect to the foregoing requirements. Following receipt of a complete letter, a representative of the County will meet with the applicant within 10 days or as soon as reasonably possible, if it is not feasible to meet within the 10-day period. The meeting will review the letter of intent and, as indicated above, focus on identifying additional information—including any other permit applications (building permits, flood hazard development permits, etc.)—needed for a full application. A full application should include:
- All information required by Section 8-5.201;
- All additional information required for responses to the previously issued Request for Proposals for nursery and processing facilities, including environmental site information, neighborhood compatibility information, safety and security plan, and operating plan; and
- Any other information reasonably required by the County to process the application. This may include, among other things, a cultural resources survey (or funding for completion of a survey during the application review process).
The applicant may then proceed to submit a full application at its earliest convenience. The application will be reviewed and accepted as complete (or rejected as incomplete) in accordance with Yolo County Code Section 8-5.106, which applies generally to development agreement applications.
Staff intend to set a deadline for letters of intent and applications under the “early implementation” program. The precise deadlines are under consideration and staff intend to return with a proposal for Board consideration on March 6, 2018.
The application fee for a letter of intent shall be the amount established by the Board of Supervisors for a pre-application for a discretionary land use entitlement ($2,255.30). Fees for the full application shall be the amount established by the Board of Supervisors for a development agreement ($7,814.60), plus any additional fees for other entitlements required for a project. These amounts are deposits and additional fees will be charged if needed to fully cover the cost of staff and outside consultant time devoted to an application.
Public Notice/Hearings
An application for a development agreement will be considered in accordance with Article 3 (Sections 8-5.301 through 304) of the Development Agreement Ordinance, with the possibility of one change to aid in streamlining application review.
Ordinarily, a development agreement is considered at two public hearings—one before the Planning Commission, and one before the Board of Supervisors—with hearing notice published in the newspaper and sent via mail to nearby landowners at least 10 days prior to the hearing. As an alternative to holding an initial hearing before the Planning Commission, the Board can declare itself the “planning agency” for cannabis-related development agreement applications submitted under the “early implementation” approach and hold a single hearing on the application. This would save up to two months (and possibly more) in processing time. Staff thus recommend this approach for Board consideration. Any later term extensions or applications for development agreements submitted under the comprehensive land use regulatory approach (under development) would follow the ordinary procedure.
Unless an exemption is applicable, the environmental review process pursuant to the California Environmental Quality Act (CEQA) also includes public participation opportunities, including the opportunity to review and comment on an environmental document.
Overall, staff will strive to ensure that interested stakeholders and nearby landowners are aware of each proposed project and have sufficient information and opportunities to comment. This may include public outreach steps beyond those described above, including but not limited to outreach undertaken in coordination with a project applicant.
Environmental Review
As mentioned above, all projects will be reviewed in accordance with CEQA unless an exemption is determined to apply. The CEQA process for a development agreement and any related approvals is no different than for other discretionary land use entitlements. It will include an initial evaluation of potential exemptions, possibly aided by preparation of an initial study, and projects that are not exempt will be evaluated in a negative declaration, mitigated negative declaration, or environmental impact report (as appropriate).
Applicants will bear all costs associated with CEQA review. Costs can vary greatly depending on project scope and complexity, as well as environmental conditions of the site and its surroundings. Outside consultants and other experts will likely be used for projects requiring more complex environmental documents and/or to augment staff resources when necessary. Fees established for CEQA document preparation will apply (generally, an initial deposit is collected and applicants cover any costs beyond the amount of the deposit).
General Terms and Conditions
Article 2 of the Development Agreement Ordinance includes many standard categories of terms for development agreements and will apply to all such agreements submitted for cultivation projects. Staff anticipate that the following terms will be a frequent subject of negotiation on individual projects, and thus may be appropriate for initial Board input:
Term—Staff propose 10 years as a standard term for all agreements. During the term, an applicant will have a vested right to develop and operate the project described in the agreement subject only to compliance with updated uniform codes (e.g., the Building Code), limitations set forth in Yolo County Code Section 8-5.204, and modification or termination rights (discussed below).
Public Benefits—Applicants may propose public benefits in a development agreement, and this will be a factor in whether an application is ultimately approved. Proposals may include payments tied to canopy area, net proceeds, gross receipts, or other metrics—any such proposals, of course, should be developed in consideration of the proposed general tax and represent more than a commitment to simply pay the tax if approved. Proposals may also include construction or funding for public infrastructure or other amenities of general benefit to local communities.
For any payments proposed by an applicant, staff propose that revenues be available for allocation by the Board to the same uses described in the general tax measure, while also reserving the right for the Board to direct revenues to other governmental purposes. While staff are not proposing to establish minimum or standard payment provisions, staff will strive to ensure equity among applicants (through appropriate means, including recommendations on project approval) so that similar projects include comparable public benefits.
Fee Offsets—As a point of negotiation for each agreement, staff would evaluate proposals to reduce (offset) any payment obligations under the agreement by the sum of any tax revenues paid pursuant to a County cannabis tax. Other non-monetary benefits proposed by an applicant could be similarly offset (i.e., reduced or eliminated) in the event a tax measure is approved.
Additional provisions of the Development Agreement Ordinance that the Board should be aware of include:
Annual review—All development agreements will include standard annual review provisions that meet the requirements of Article 5 of the Development Agreement Ordinance.
Modification or Termination—Article 6 of the Development Agreement Ordinance provides for hearings to terminate or modify a development agreement in the event of a breach. Any such determination must be supported by substantial evidence that the applicant has not complied with the terms of the agreement.
Lastly, all development agreements recommended for approval will be based on a standard template that includes indemnity and defense provisions and other terms common to such agreements.
Performance Standards
Staff continue to evaluate specific methods of addressing the two most frequently raised concerns with cultivation operations: odor and, for greenhouse and similar operations, lighting and other aesthetic impacts. Rather than identifying specific methods for addressing each potential impact, staff instead propose that a final “early implementation” policy express generally that a project must prevent all significant offsite odor and lighting/aesthetic impacts. This is not a strict “zero impact” standard but staff will work with applicants during the application review process to achieve as close to a “zero impact” outcome for each project, particularly for offsite odor impacts, as may be feasible with current technology.
Various technologies and other means are apparently available to accomplish this outcome. The precise technologies to be implemented for a particular project will be proposed by an applicant and reviewed carefully by staff to determine if they provide sufficient assurance impacts will be avoided. To assist in staff and Board evaluation of odor mitigation technologies, County staff expect to retain one or more outside experts to provide an objective evaluation of potential efficacy. Each development agreement will affirmatively establish the applicant’s burden to develop, install, and maintain all equipment and other measures necessary to prevent all offsite odor and lighting impacts.
The full array of other potential environmental and operational (including public safety) issues will also be assessed during the application review process. Some examples include: energy efficiency, potentially including a commitment to purchase energy from the Valley Clean Energy; public safety concerns and related measures, including coordination with law enforcement and local fire protection districts; and traffic impacts, including infrastructure improvements or other measures may be necessary to reduce or avoid project impacts. It may frequently be the case that most if not all environmental impacts will be determined to be less than significant.
Lastly, staff will develop development agreement language that obligates cultivators to take all reasonable steps to eliminate the potential for illegal diversions. This will include reporting obligations in the event illegal diversions occur to assist law enforcement in apprehending responsible parties. Repeated illegal diversions, particularly if a cultivator is not implementing appropriate preventative measures, will be a basis for terminating a development agreement. And of course, consistent with the County’s current ordinance, an owner or licensee’s conviction of a diversion-related crime would also be a basis for termination.
Next Steps
Staff propose that the Board consider two actions:
- Provide direction regarding the approach presented above and direct staff to return for adoption of a policy document reflecting the approach on March 6, 2018; and
- Authorize submission of letters of intent, effective immediately. A final deadline for such letters and subsequent applications will be included in the March 6 policy. The deadline will allow sufficient time after March 6 for applicants to prepare and submit letters of intent (i.e., it will not fall immediately after the Board meeting).
As part of a March 6 item, staff may also propose criteria to be applied in prioritizing applications for processing. Only limited staff resources are available to implement the approach outlined herein. Staff expect to prioritize applications for processing in a manner that considers available resources, including any outside assistance that may be retained. Depending on the volume of applications received, it is possible that some will be difficult or impossible to process in advance of adoption of the comprehensive land use ordinance.
Comprehensive Land Use Regulations
Work on the comprehensive land use regulations is underway pursuant to the schedule previously presented to the Board. The work accomplished to date by County staff, input from the public, and direction from the Board will guide the drafting of the ordinance. An outline for the ordinance is being developed, and staff is undergoing review of consultants to prepare the programmatic EIR. Staff proposes to return to the Board on March 6, 2018 with an outline of the ordinance and approach, a contract for the EIR consultant, and a discussion of whether and how to expand the cannabis ordinance to include other licenses categories. Key tasks and dates include the following:
Early March Board direction on ordinance outline and approach
Mid-March Release first draft of ordinance
Late March Citizen Advisory Committees
April Planning Commission and Board Workshops
Mid May CEQA Notice of Preparation
Early September Release Draft EIR and revised ordinance
Early December Release Final EIR and proposed ordinance
December/January Citizen Advisory Committees
February Planning Commission hearing and recommendation
March 2019 Board hearing and final action
Nursery and Processing Facility RFP
Review of the applications was completed on January 31. The four applicants will now proceed to Phase 2 of the process – interviews and site visits, which will between February 6 – February 20, 2018. On March 6th, 2018, staff will provide the Board with the applicants recommended to proceed to the CEQA process.
General Tax Measure for the June 2018 Ballot
Ordinance
At the Board’s meeting on January 23, 2018, pursuant to the Board’s direction at the January 9, 2018 meeting, the Board considered an ordinance imposing a cannabis business tax ranging from 1-15% of gross receipts on all commercial cannabis activities. Under the ordinance, the County would tax commercial cultivation at an initial rate of 4% of gross receipts, effective July 1, 2018, and automatically increasing to a rate of 5% of gross receipts on July 1, 2020. All other commercial cannabis activities including but not limited to nurseries, dispensing/retailing, processing, manufacturing, laboratory testing, distributing, or delivery of cannabis in the unincorporated area would be taxed at an initial rate of 5%, effective July 1, 2018. The Board would have discretion to set the rate within the 1-15% range, but the Board could not alter the rate more than once in a 12-month period or by more than two percentage points.
After reviewing and discussing the proposed ordinance at the January 23, 2018 Board meeting, the Board directed staff to make the following changes to the ordinance for this second reading:
- Revise the language in the County Counsel Summary describing for what purposes the tax revenue could potentially be used; and
- Adding language to Section 3-07.28 of the ordinance clarifying the role of the Citizen’s Oversight Committee.
Attached as Attachment C is the revised ordinance, with the above modifications included. Attachment D is the revised ordinance, with the requested changes from the first reading tracked.
Resolution
Attached as Attachment E is a resolution placing the ordinance on the ballot at the June 5, 2018 election. As a general tax, the tax measure requires approval by a majority of the voters at the election. The resolution includes the following proposed ballot question, which is limited to 75 words and must contain certain basic information to pass legal standards:
TAX ON CANNABIS BUSINESS
Shall a tax be imposed on cannabis businesses in the unincorporated area of Yolo County, subject to audits and a citizen’s oversight committee, at a variable rate between 1-15% of gross receipts, with a 4% initial rate on cultivation increasing to 5% in the third year, and 5% for any other cannabis business, with subsequent adjustments of no more than two percentage points (up or down) in any 12 month period?
Action
The recommended action for the Board today is to adopt (a) the cannabis business general tax ordinance and (b) the resolution placing the cannabis business general tax ordinance on the ballot at the June 5, 2018 election, which requires a 4/5 vote of the Board. |